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If you’re like many of us, you need your car to get to work or school, carpool kids or grandkids, or to do your shopping. But what happens if you are getting calls from debt collectors who you can’t pay? Can a debt collector take your car?

Our reader, Marbella, who lives in California, says a collection agency told her she must appear in court over a debt of $1,200 that she defaulted on a while back:

I’m not working right now and I don’t think I am until about a year. Now the thing is that I have a car under my name but my (boyfriend) also appears on the title. Could they go after the vehicle?

“Like many life situations, there’s the formal, legal answer, and then there’s the practical answer,” says Northern California bankruptcy attorney Cathy Moran, who blogs at BankruptcyInBrief.com. “Legally, a creditor with a judgment could reach the share of a co-owned asset that its debtor owns. If there is a loan attached to the car, there has to be enough value in the car to pay off the debt from your share of the car before a creditor could have the sheriff tow the car and sell it. They’d have to give the co-owner his share of the sale price.”

But practically speaking, there are a few hurdles. The first is the fact that some personal property is off-limits to creditors. In our reader’s case, the California exemption protects $2,900 in equity in a vehicle. (In each state, specific property is “exempt” or safe from creditors. Types and amounts of exemptions vary by state.) “So the car would have to have enough value to pay the sheriff’s fees to tow and sell it and the exemption to which you are entitled before the creditor gets anything from the sale,” says Moran.

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In fact, Moran says that in 37 years of law practice, the only creditor she’s seen try to seize and sell a car is the Internal Revenue Service. (Note: the IRS has greater powers than other creditors when it comes to seizing property.)

And there’s another hurdle: Before a creditor can go after an asset like a car they must first get a judgment in court. And to do that they must sue the consumer and win — and again, only then could they try to seize and sell the car.

“Going this route is expensive for the judgment creditor and risky in that any procedural error could open the judgment creditor to one or more federal or state consumer protection law claims,” says Atlanta bankruptcy attorney Jonathan Ginsberg. “Since you are only part owner of the vehicle, the seizure option is even less attractive, especially since the total debt is only $1,200,” he says. He agrees with Moran that the IRS is the only creditor that would likely go after personal property like a car.

But that doesn’t mean Marbella — or you, if you find yourself in a similar situation — should just ignore collectors. If you are sued for a debt and fail to show up in court, the plaintiff (the collector or creditor who sues you), will get a judgment against you which may open the door for them to go after property that is easier for them to get, such as your wages or money in a bank account. Exactly what they can do to collect a judgment debt depends on state law. A consumer law attorney can tell you what’s at risk and may be able to help you negotiate a settlement or raise a defense to the lawsuit in court. “You can also talk to your lawyer about possibly filing bankruptcy,” Ginsberg says, “which could make the problem go away entirely.”

Also worth noting is the fact that if a creditor already has a judgment against you, some property may be at risk already. Credit.com commenters often tell us that they didn’t even realize there was a judgment against them until they got their credit reports or credit scores (you can check your credit scores for free every month on Credit.com) — or until they discovered their bank account had been emptied by a judgment creditor. Here’s how to get your free annual credit reports to find out if a judgment is listed there. If you find one, make an appointment with a consumer bankruptcy attorney right away to discuss your options.

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Gerri Detweiler focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.

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